Federal Reserve Chair Jerome Powell held a postmeeting press conference on Jan. 29 following the central bank’s latest rate decision. During the conference, Powell addressed various topics, including the Federal Reserve’s stance on cryptocurrency and its implications for financial stability and individual investors.
Powell was asked about the risks associated with cryptocurrency, as outlined in the annual report from the Financial Stability Oversight Council. Specifically, he was questioned about the potential impact of speculation in this unregulated asset class on individuals and households, distinct from concerns about the financial system. In response, Powell emphasized the Federal Reserve’s primary role in overseeing banks that engage with cryptocurrency-related activities.
“Our role with bitcoin really is to look at—with crypto really—is to look at the banks,” Powell said, adding:
And we think banks are perfectly able to serve crypto customers as long as they understand and can manage the risks … A good number of our banks that we regulate and supervise do that.
Expanding on the regulatory approach, Powell noted that banks face a higher threshold when engaging in cryptocurrency activities due to the relative novelty of the sector. He highlighted the importance of ensuring that such activities remain safe within the banking system, especially since banks operate within the federal safety net, which includes deposit insurance. Powell explained that regulators aim to strike a balance between innovation and risk management, stating:
We’re not against innovation, and we certainly don’t want to take actions that would cause banks to terminate customers who are perfectly legal just because of excess risk aversion maybe related to regulation and supervision.
I do think it would be helpful if there were a greater regulatory apparatus around crypto, and I think that’s something Congress was working on quite a lot.
“We’ve actually spent a lot of time, you know, with members of Congress, working together with them on various things, and I think that would be a very constructive thing for Congress to do,” the Fed Chair noted.
Source:news.bitcoin.com
